A medical worker is caring for a newborn baby in an incubator at Jingzhou Maternity & Child Healthcare Hospital on the eve of Chinese New Year, the Year of the Ox, on February 11, 2021 in Jingzhou, Hubei Province, China.
Huang Zhigang | Visual China Group | Getty Images
BEIJING – China’s decades-long one-child policy has received renewed attention in recent weeks, after authorities sent mixed signals as to whether they were closer to removing the limits on the number of children people can have.
Authorities have reversed controversial one-child policies in recent years to allow people to have two children. But economists say other changes are needed to boost growth as the number of births decline and the Chinese population rapidly ages.
“There are two ways to go about this. One way is to relax birth control, something (that) will help on the fringes, but even if they completely relax control, it’s probably hard to reverse the trend.” , said Zhiwei Zhang. , chief economist at Pinpoint Asset Management.
“The other way to deal with it, from an economic policy perspective, is to make the industry more dependent on other sectors,” he said.
China’s economy relies heavily on industries such as manufacturing, which require large amounts of cheap labor. But rising wages are making Chinese factories less attractive, while workers need better skills to help the country become more innovative.
The bigger problem for China is that an aging population is addressing an existing problem: slower labor productivity growth, said Alicia Garcia-Herrero, Natixis chief economist for Asia Pacific. She looks at whether China will see more growth in capital-intensive sectors, which are more driven by investments in automation.
Births will drop by 15% in 2020
China introduced its one-child policy in the late 1970s in an attempt to slow population growth. According to official figures, the country had doubled in size from more than 500 million people in the 1940s to more than 1 billion in the 1980s.
Over the next 40 years, the population grew by just 40% – to 1.4 billion, more than four times the rate in the US today.
I don’t think the relaxation of birth policies could have much economic impact, because the slow population growth has not been the result of policy constraints, not over the past twenty years.
Dan Wang |
chief economist, Hang Seng China.
As with other major economies, China’s high housing and education costs have deterred people from having children in recent years.
Despite a change in 2016 that allowed families to have two children, the number of births in 2020 fell for the fourth year in a row, dropping 15% to 10 million, according to analysis of a public safety report.
“Overall, I don’t think the relaxation of birth policies could have much economic impact because the slow population growth has not been the result of policy constraints, not the past 20 years,” said Dan Wang, Shanghai. chief economist at Hang Seng China.
She said that based on the experience of other countries, the most effective policy for a country the size of China would be to welcome more migrants, but that would be an unlikely change in the short term.
Other options that policymakers are already pursuing include raising the retirement age, increasing the skills of the existing workforce with more education, and using more machines and artificial intelligence to replace human workers, Wang said.
Policy change is only a matter of time
The one-child policy received renewed attention last month when the National Health Commission released a statement authorizing research into the economic benefits of lifting birth control in a northeastern region. The three-county area known as Dongbei has struggled economically and has the lowest birth rates in the country.
Two days later, the committee issued another statement saying the news was not a test for full withdrawal of the family planning policy, despite much online speculation that it was.
But according to the economists interviewed by CNBC, lifting limits is probably only a matter of time.
Yi Fuxian, a critic of one-child politics and author of the book Big Country With an Empty Nest, said he expects a decision at the end of the year after China publishes the once-in-a-ten year results. in April.
Challenges of the aging Chinese population
The Chinese government has also said that implementing a strategy to respond to an aging population will be a priority for its next five-year plan, which will be officially approved in a parliamentary session starting this week.
Meanwhile, the generations born before the one-child policy was introduced in the 1980s are becoming an important segment. In the next 10 years, 123.9 million more people will enter the age bracket of 55 and older, the largest demographic increase of any age bracket, Morgan Stanley said.
This demographic shift will create its own economic demands, said Liu Xiangdong, deputy director of the economic research division of the China Center for International Economic Exchanges in Beijing.
Liu said more workers will be needed to care for the elderly, while there will be more demand for retirement communities and other infrastructure tailored to the elderly.